5 Years Later - What Did Obama's "American Recovery & Reinvestment Act" Achieve?

The 17th of February, 2014, marked the annual observation of George Washington's birthday and the 5th anniversary of the American Recovery and Reinvestment Act. Given that is has been half a decade since President Obama signed that bill into law, it would not surprise me if you did not immediately recognize what it entailed. However, the term "Government Bailout" will certainly jolt your recollection.

"The $830 billion spending blowout was sold by the White House as a way to keep unemployment from rising above 8%. But the stimulus would fail on its own terms. 2009 marked the first of four straight years when unemployment averaged more than 8%. And of course the unemployment rate would have been even worse in those years and still today if so many people had not quit the labor force, driving labor-participation rates to 1970s levels."

Given that Governments are generally the worst allocators of capital it should come as no real surprise that the money was squandered on non-productive investments.

"$783,000 was spent on a study of why young people consume malt liquor and marijuana. $92,000 went to the Army Corps of Engineers for costumes for mascots like Bobber the Water Safety Dog. $219,000 funded a study of college 'hookups.'"

However, it really is much worse than that. The table below shows the "taxpayer cost" of the bailout on various economic metrics.

It cost taxpayers roughly more than $0.50 for each and every dollar of economic growth over the last 5 years. $206,879 for every job created. $0.84 for every dollar of real personal consumption expenditures and $0.90 for every dollar of increase in real personal incomes (not including government transfers).

The ARRA was supposed to boost "shovel ready" infrastructure and investment projects by businesses which would have created jobs and economic prosperity. Sadly, that was not to be the case as fixed investment has fallen $53.50 for every dollar of government funded bailout while the labor force participation declined by almost 4 million.

However, that is really not the whole story to be told of government bailouts and interventions. As I discussed previously, the real total of government interventions, bailouts and artificial supports far exceeds the initial ARRA of $830 billion. Today, as shown in the table below, that number has risen above $31 Trillion.

If we apply the total of all government interventions into the same analysis as above, we find a far more disappointing result.

At a cost of $19.90 for each dollar of economic growth, almost $8 million for each job created and a loss of nearly $600,000 of fixed investment, it is hard to suggest that the government interventions have been successful. The Wall Street journal really summed it up best:

"The failure of the stimulus was a failure of the neo-Keynesian belief that economies can be jolted into action by a wave of government spending. In fact, people are smart enough to realize that every dollar poured into the economy via government spending must eventually be taken out of the productive economy in the form of taxes. The way to jolt an economy to life and to sustain long-term growth is to create more incentives for people to work, save and invest. Let's hope Washington's next stimulus plan is aimed at reducing the tax and regulatory burden on American job creators."

This is exactly correct. It is also something I discuss each month when I review the NFIB's monthly small business survey. The government has done an extremely poor job of allocating capital and trying to pick "winners over losers." Increased regulations and taxes have inhibited job growth while the Fed's artificial interventions have created the greatest "wealth transfer" from the middle class to the rich in U.S. history. This has led to a toxic mix of economic slack, low labor force participation, suppressed wage growth, and high levels of government dependency.

I do not disagree with the argument that, without government interventions, the economic recession would have been far worse. However, there is also no real evidence that the economy is gaining any organic traction either. This is due to the continued misallocation of resources, combined with ever increasing levels of government debt, which continue to rob future economic growth for short term stability. This is clearly shown by the chart below.

Of course, five years after all the bailouts began, the Keynesian argument remains "fool proof." The only reason that the economy is not growing faster is because the government is not doing enough. However, if the economy slips back into a recession, it will simply be because the government did not do enough. You simply can't argue against logic like that.

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Deflation can only be met with more printing (it is all that will be tolerated anyway.) In spite of the failure of prior 'more printing' we shall see 'even more printing' lest the prominent and powerful might fail.

Yeah, I just played it for the firs time tonight. Utterly meaningless, just the insatiable quest for MOAR. Thousands, millions, billions, trillions.... all wasted time and effort. Straight down the toilet.

Boris respectfully is take issue with article. Is not business of centralized kleptocracy for "create incentive". Only business of legitimate government is establish and enforce equitable law reflection of natural law and inalienable right of people. Is business of individual for obedience to law and motivate self.

We need congressional committees on ELIMINATING current laws and removing the constraints that keep us all from transacting freeling with others.

We talk about being free in this country but when you visit just about any other country in the freaking world you see things like, people on the side of the street pushing a cart willing to whip you a plate of local favorite dishes. NOT IN AMERICA!! Because some governmental rule will prevent it via permitting. and if pernitting doesn't kill free enterprise, then some inspector with a thermometer will shut them down.

yah yah, some of you will talk about how safe you feel now that the government protects you from unsafe food practices. If you actually believe that, you've never been in the kitchen of ANY restaurant, where NO patron can actually see what goes on. At least on the street, you can watch every step of the process.

We must remove constraints and let free thinking people behave freely.

There's plenty of 'shovel ready jobs' except the kleptocrats and the oligarchs don't want to engage in OR Pay for real work - a Finacial Scam is much easier -
The problem w the stimulus is most of it was stolen - ANY business that had the level of graft and corruption the gov has wouldn't function either - well not without gov protection and bailouts -
During FDR's time the WPA and CCC spent 97% of monies on wages and raw materials - now you'd be lucky if the damn paycheck writing corp didn't take more than the 3% overhead.
Heck the actual model is now bid out at $150 per hour - sub it out multiple times until the sucker who does the actual works lucky to be paid $15 an hour - that's a 90% overhead/graft cost -
Say what you will about Keynes but he didn't include corruption and graft in his 'efficiency models
Forget Keynes - study Mussulini instead - and buy rope '

>>>The way to jolt an economy to life and to sustain long-term growth is to create more incentives for people to work, save and invest<<< Lets hope the creation of jobs, fast and by any means, is part of the above "incentives".

So if instead of giving that money to the banks, they had loaned it to American Business that employ people and make things, lets say any company with 50 or more employees and a history of paying their tax bills promptly.. where would the economy be..

Oh wait we would have had tons of Unemployed bank people and financiers.. can't have those high paying people making 500 a week on unemployment

In the good world (not this one) all the broke banks and corps would have gone tits up, their assets sold to non-ponzi people, and after a shot term painful reorg, shit goes back on track. Stupid, vain and corrupt should loose not win. But in this world, well look out the window.

I forgot BrightSource and Sanjay Wagle, who, in concert with Google, is frying endangered birds in your neck of the woods...

"BrightSource received a $1.6 billion loan guarantee from the Department of Energy, funds that were allocated in the $787 billion stimulus package passed in 2009.

The largest investor in Brightsource (with a 25 percent stake) is VantagePoint Venture Partners, a firm whose principal, Sanjay Wagle, helped raised millions for President Obama’s campaign in 2008 and even served as a “renewable energy grants adviser” at the DOE."

had forgotten ...... Stevie R...........remember the brilliantly induced bank run on Indy Mac by Chuckie Schumer? of course not,,,,, the Candy Crowleys & Jon Stewarts (what is his real name again) of the world will never remind you

So, 1.6 Bil loan guarantee coupled with a $600 MM usd investment tax credit (30% capital cost of project, estimated at 2.2 Bil). Pretty much covers the question of "why is this nightmare so expensive?" What happened to all of NRG's and Googles money?

It's a virtal lock for failure. We can address the particulars in about a year.

Al Whore laughed all the way to the bank(sters). I hope his private jet flies over an active volcano and makes a vertical landing. The 'Green' revolution was nothing but green fiat padding the accounts of unconscionable assholse like Gore, 'climate apologists', -public-money-fed researchers, etc.

The problem was that the U.S. wasted resources on "shovel ready" when it could have been better served by a focus on the "noose ready" like Jamie Simon and Warren Buffet and Hank Paulson. Much better economic growth if the crooks cannot steal from the taxpayers.

I'm out also. I don't even read 'papers' anymore. Don't own a tee-vee (well got one but if anybody I let in my place dares enter the matrix with it they be gone). The bullshit is with us and I may not be young and dumb enough to throw any serious punches, but I won't play anymore either.

"Keeping Up With The Czardashians' Nope, see the same entitlement-sucking pieces of shit each and every 'season', in Ho-ho-ho-llywood or in District of Scumbia. Makes no difference now, this shit will end one day, sooner than most sheople ever expect and later than most ZH'ers hoped for. But it will end.

I differ in the real solution. We need to have real law enforcement. No more TOO BIG TO FAIL, TOO BIG TO JAIL. The financial and political crimes, crimes against the Constitution are at the root of our problems. Unfortunately the criminals are in charge and the only way I see to correct the problems is to take action.

What's enough? Print $10 trillon/year, $100 trillion/year? Maybe send $100.000 per person in the US and Puerto Rico for spending would sure generate inflation. It would stimulate China and other countries like Vietnam.

What we have is a religion of economic theory. It is as virulent a religion that exists and it demands everything of it followers. Any failure, any back set only proves our lack of obedience to the religion. We do not question the mandates of those who speak for this religion, as a matter of fact those who do question it are blamed for any failing of the religious dictum. Not all that unlike radical Muslims, those deniers may well receive a fatwa which represents a direct threat to their public standing as well as a potential audit from the Papal Police (IRS). Until these non thinking zealots are off of the throne of power, we will be left debating the beauty and opulence of the King's clothes. Delusion will be our only escape.

What alternative universe do you idots live in. In September 2008 we lost 400,000 jobs. By January it was 800,000. The stimulus bill, bank stress tests, and various Fed liquidity funds prevented a total economic collapse. No one claims the stimulus bill was the most productive use of money but absent something we would be living in a world run by guns and amo. Moreover, I don't need to rely on any counter-factuals to prove the stimulus worked. Just look at Europe where austerity policies were followed. Euro area growth since 2010 (the first year of the US stimulus) was half the growth rate of the US. There is no other explanation for this difference besides the stimulus. To think that following Hayek we should all just let the world economy collapse is either an anarchist or mentally insane. And flame all you want, i GUARANTEE IT I HAVE BEEN FOLLOWING ZEROHEDGE longer than any commentator on this board. I make my analysts read zerohedge regularly and I was one of the first commentators who corrected Tyler's faulty math in calculating the Citibank Preferred exchange rate in March 2009.

Be proud then. We would be climbing back onto our feet instead buckling onto our knees before another collapse that will be a direct knockout punch. 2008 was nothing. 201X Will be Hell on Banker Earth.

So you think bailing out criminals so they can continue to live the high life is good because otherwise they would have been hung? Nothing has been learned. Nothing has been fixed. Nothing is going to stop it from happening again, and again, and again unless the criminals are hung. Maybe you are one of them? I only ask becuase people are keeping lists for the day it happens again.

You are right, the stimulus was about stopping/slowing the slide and not to create an actual recovery. But that was not how it was projected. Of course, politicians cannot possibly get away simply by telling the truth that there is no possibility of a recovery and vast sums of "tax payer" money need to be injected just to stop/slow the slide. But when the next meltdown starts, as it inevitably will, those who used up the extraordinary measures to stop/slow the previous slide will be in a far worse position than those who didn't. Since government capital injections into banks are now prohibited by law, they would have to resort to direct fiscal spending, which can have only one consequence, huge inflation and possibly hyperinflation.

Thw White Hispanic says that the White Negro and his light skinned African American Atty General fucked him and now he can't get a job. This is the way one has to communicate in order to get a shovel ready Gov't job.

The author seems to mistake Keynesian theory with corruption and graft -
But that's easier than naming actual NAMES of the the kleptocrats and oligarchs who stole it all -
Te actual amount that went to true stimulus is probably about 10-15% of total $ spent.
It's upwards redistributionist policy moving wealth to the top .01% all the while calling it 'saving the middle class' -
Orwell would be proud - and so would mussillini